In just ten days, Tesla CEO Elon Musk has gone from a popular Twitter contributor and critic to the company’s largest individual shareholder to a potential owner of the social platform – a whirlwind of activity that could drastically change the service given the sometimes bizarre billionaire. identification as an absolutist of freedom of speech.
Twitter revealed on Thursday that Musk had offered to buy the company directly for more than $ 43 billion, saying the social media platform “needs to be transformed as a private company” to build trust among its users. .
“I believe that freedom of speech is a public imperative for a functioning democracy,” Musk said in the document. “I now realize that the company will neither thrive nor serve this social imperative in its current form.”
Later in the day, during a TED 2022 stage interview, he said even more broadly: “Having a public platform that is highly trusted and inclusive is crucial to the future of civilization.”
Since appearing on the scene in 2006, Twitter has been home to thriving social and political commentary, shared news, scandalous gossip, cat memes and controversy over the color of dresses. But it has also provided a platform for viral misinformation and lies, harassment and hate speech, and gangs of trolls who can shout posters they disagree with, unleashing waves of vile images, threats and similar acts of online aggression.
Twitter has gone to great lengths to keep the latter, while maintaining the former – though not always in ways that satisfy most users. Like other platforms, he imposed restrictions on tweets that threaten violence, incite hatred, harass others and spread misinformation. Such rules led to Twitter’s decision to ban former President Donald Trump after the Capitol uprising in 2021.
Twitter has also become a destination for brands and advertisers, many of whom prefer stricter content restrictions and a megaphone for high-ranking figures such as Trump and Musk, who use it to gather supporters and promote business ventures.
Musk, who described Twitter as a “de facto town square”, described in detail some specific potential changes on Thursday – in favor of temporary rather than permanent bans – but mostly described his goal in broad and abstract terms.
He said he wanted to open the “black box” of artificial intelligence technology that drives Twitter feeds so that people have more transparency about why some tweets can go viral and others disappear. “I personally wouldn’t be there to edit tweets,” he said, “but you’ll know if anything has been done to raise, lower or otherwise affect tweets.”
The billionaire is a strong critic of Twitter, mostly because of his conviction that he does not comply with the principles of freedom of speech. The social media platform has angered Trump and other right-wing political figures whose accounts have been suspended for violating content standards for violence, hatred or harmful misinformation. Musk described himself as an “freedom of speech absolutist,” but was also known to block other Twitter users who doubted or disagreed with him.
While Twitter’s user base remains much smaller than that of competitors such as Facebook and TikTok, the service is popular with celebrities, world leaders, journalists and intellectuals. Musk himself has more than 81 million followers, rivaling pop stars such as Lady Gaga.
Shares of Twitter closed at $ 45.08, down just under 2 percent, well below Musk’s offer of $ 54.20 a share. This is usually a sign that some investors doubt that the deal will be completed. Shares remain below their 52-week high of about $ 73.
Musk called the price his latest bid, although he did not provide details on funding. The offer is non-binding and subject to funding and other conditions.
Twitter has said it will decide whether accepting the offer is in the best interests of shareholders. However, it is unclear how the Twitter board will react after evaluating the offer. He will probably negotiate for a higher share price, or he may want regulations to ensure the board remains independent of Musk, said John Coffey, a law professor at Columbia University and head of his corporate governance center.
The board could adopt “poison pill” regulations to offer more shares and reduce the value of Musk’s shares if Musk’s stake rises to 10% or 15%, Coffee said. Even then, Musk could still take over the company by proxy, with the current directors voting.
At the TED conference, Musk said he had the money. “Technically I could afford it,” he said, and laughed.
If Musk completes his takeover attempt, he could probably raise the roughly $ 43 billion he needs, probably by borrowing billions, using his stakes in Tesla and SpaceX as collateral.
Most of Musk’s fortune, valued by Forbes at nearly $ 265 billion, is tied to Tesla shares. The company allows CEOs to use shares as collateral for loans, but limits the loan to 25% of the value of the pledged shares.
Data provider FactSet says Musk owns 172.6 million shares worth $ 176.47 billion. Just over 51% of its stake is already pledged as collateral, according to a Tesla spokesman. That means Musk could use the remaining stake to borrow about $ 21.5 billion. He could also borrow from his stake in private SpaceX.
Musk has revealed in regulatory documents in recent weeks that he has bought shares on Twitter almost every day, starting on January 31 and ending with a share of about 9%. Only the Vanguard Group controls more Twitter shares. A lawsuit filed Tuesday in federal court in New York alleges that Musk illegally delayed the disclosure of his stake in social media company so he could buy more shares at lower prices.
The US Securities and Exchange Commission may punish Musk for hurting other investors by taking too long to uncover his buyout of shares on Twitter, but it is unlikely to do anything to stop the takeover. said Chester Spat, a former SEC chief economist.
“It’s going to happen relatively quickly,” said Spat, now a professor of finance at Carnegie Mellon University.
Jacob Frenkel, a former SEC lawyer now in Dickinson Wright’s Washington law firm, said it was difficult to prove an investor’s intent in a disclosure case. “The mere fact of a breach of disclosure does not mean that there was fraud,” Frenkel said.
However, there is “a lot of fuss to investigate” whether anyone who knew about Musk’s stock purchases traded the stock before Musk’s public announcement, Frenkel said.
After Musk announced his stake, Twitter quickly offered him a seat on the board, provided he owned no more than 14.9% of the company’s stock. But the company said five days later that he had refused. The decision coincided with a series of already deleted and not always serious tweets from Musk offering major changes to the company, such as removing ads – its main source of revenue – and turning the San Francisco headquarters into a homeless shelter.
The reversal prompted CEO Parag Agraval to warn officials earlier this week that “there will be distractions” and “turn off the noise and stay focused on work”.
Twitter did not do as well as its social media competitors and lost money last year. The company reported a net loss of $ 221 million in 2021, largely due to a lawsuit filed by shareholders who said the company had misled investors about how much its customer base was growing and how many users were interacting with its platform. Its co-founder, Jack Dorsey, resigned as chief executive at the end of November and was replaced by Agrawal.
“I’m not saying I have all the answers here, but I think we just want to be reluctant to delete things and just be very careful with the constant bans,” Musk said. “It will not be perfect,” he said, but there must be a perception and reality that speech is “as free as possible.”
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